Question 1

An increase in price will result in an increase in total revenue if demand is:

Accepted Answer

A) perfectly elastic. 
B) relatively elastic. 
C) inelastic. 
D) unit elastic. 
A) perfectly elastic. 
B) relatively elastic. 
C) inelastic. 
D) unit elastic.

Question 2

Explain why the price elasticity of demand varies along a demand curve,even if the demand curve is linear.

Accepted Answer

As we move down a demand curve,the perce

Question 3

Assume an analyst has been hired to estimate the price elasticity of demand for Levi's brand blue jeans and for blue jeans in general.Ceteris paribus,we would expect the price elasticity of demand in absolute value to be:

Accepted Answer

A) larger for Levi's brand blue jeans than for blue jeans in general. 
B) larger for blue jeans in general than for Levi's brand blue jeans. 
C) approximately the same for both Levi's brand blue jeans and blue jeans in general. 
D) none of the above because the market for blue jeans cannot be analyzed using the model of supply and demand. 
A) larger for Levi's brand blue jeans than for blue jeans in general. 
B) larger for blue jeans in general than for Levi's brand blue jeans. 
C) approximately the same for both Levi's brand blue jeans and blue jeans in general. 
D) none of the above because the market for blue jeans cannot be analyzed using the model of supply and demand.

Question 4

Assume that when the price of good X is $12,quantity demanded is 32.When price is decreased to $9,quantity demanded increases to 45.Over this range,the arc elasticity of demand is 1.182.

Accepted Answer

A) True 
 B)False

Question 5

When demand is perfectly inelastic with respect to price,the demand curve is horizontal.

Accepted Answer

A) True 
 B)False

Question 6

The price elasticity of demand is measured as the percentage change in quantity demanded divided by the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 7

Assume that when the price of good X is $7,quantity demanded is 25.When price is increased to $9,quantity demanded falls to 20.Based on this information,over the range in question demand is elastic.

Accepted Answer

A) True 
 B)False

Question 8

If the consumer has a great deal of time to adjust to an increase in the price of gasoline,which of the following is correct?

Accepted Answer

A) Quantity demanded will be relatively sensitive to the change in price. 
B) The percentage change in quantity demanded will be quite small relative to the percentage change in price. 
C) The percentage change in price will be quite large relative to the percentage change in quantity demanded. 
D) Demand will tend to be unitary elastic as it is for most goods in the long run. 
A) Quantity demanded will be relatively sensitive to the change in price. 
B) The percentage change in quantity demanded will be quite small relative to the percentage change in price. 
C) The percentage change in price will be quite large relative to the percentage change in quantity demanded. 
D) Demand will tend to be unitary elastic as it is for most goods in the long run.

Question 9

According to the text,the price elasticity of demand for oranges has been estimated to be -0.62.This implies that a doubling of the price of oranges would cause the quantity demanded of oranges to:

Accepted Answer

A) increase by 6.2 percent. 
B) decrease by 6.2 percent. 
C) increase by 62 percent. 
D) decrease by 62 percent. 
A) increase by 6.2 percent. 
B) decrease by 6.2 percent. 
C) increase by 62 percent. 
D) decrease by 62 percent.

Question 10

While the demand for beer is relatively price inelastic,the price elasticity of demand for a particular brand is relatively high,due in large part to availability of close substitutes.

Accepted Answer

A) True 
 B)False

Question 11

Observations of consumer behavior suggest that when the price of gasoline rose above $3.50 per gallon,consumer demand for gas became considerably more price elastic.

Accepted Answer

A) True 
 B)False

Question 12

Suppose the demand for meals at a medium-priced restaurant is elastic.If the management of the restaurant is considering raising prices,it can expect the total revenues the restaurant earns to:

Accepted Answer

A) increase. 
B) stay the same. 
C) decrease. 
D) cannot be determined with the information given. 
A) increase. 
B) stay the same. 
C) decrease. 
D) cannot be determined with the information given.

Question 13

When a consumer moves from a lower to a higher indifference curve,the marginal rate of substitution automatically increases.

Accepted Answer

A) True 
 B)False

Question 14

For a particular product,a demand elasticity is a quantitative measure that shows:

Accepted Answer

A) the percentage change in quantity demanded relative to the absolute change in any of the other variables included in the demand function for that product. 
B) the absolute change in quantity demanded relative to the percentage change in any of the other variables included in the demand function for that product. 
C) the percentage change in quantity demanded relative to the percentage change in any of the other variables included in the demand function for that product. 
D) the absolute change in quantity demanded relative to the absolute change in any of the other variables included in the demand function for that product. 
A) the percentage change in quantity demanded relative to the absolute change in any of the other variables included in the demand function for that product. 
B) the absolute change in quantity demanded relative to the percentage change in any of the other variables included in the demand function for that product. 
C) the percentage change in quantity demanded relative to the percentage change in any of the other variables included in the demand function for that product. 
D) the absolute change in quantity demanded relative to the absolute change in any of the other variables included in the demand function for that product.

Question 15

Many unions attempt to raise the hourly wages received by their members by restricting the supply of workers firms can hire from.Assuming the demand for workers who belong to these unions is inelastic,this would cause:

Accepted Answer

A) wages of individual union members to decrease and the total (combined)income of union members to increase. 
B) wages of individual union members and the total (combined)income of union members to decrease. 
C) wages of individual union members to increase and the total (combined)income of union members to decrease. 
D) wages of individual union members and the total (combined)income of union members to increase. 
A) wages of individual union members to decrease and the total (combined)income of union members to increase. 
B) wages of individual union members and the total (combined)income of union members to decrease. 
C) wages of individual union members to increase and the total (combined)income of union members to decrease. 
D) wages of individual union members and the total (combined)income of union members to increase.

Question 16

Which of the following is not a basic assumption underlying the theory of consumer behavior?

Accepted Answer

A) Consumers prefer more to less. 
B) Consumer preferences depend on the amounts of goods they consume as well as the amounts being consumed by other consumers. 
C) Goods are continuously divisible, that is, consumers can always purchase one more or one less unit of a good. 
D) Consumers have well-behaved preferences, that is, preference orderings are complete. 
A) Consumers prefer more to less. 
B) Consumer preferences depend on the amounts of goods they consume as well as the amounts being consumed by other consumers. 
C) Goods are continuously divisible, that is, consumers can always purchase one more or one less unit of a good. 
D) Consumers have well-behaved preferences, that is, preference orderings are complete.

Question 17

According to the text,the price elasticity of demand for bath tissue has been estimated to be -2.42.This implies that a 10 percent decrease in the price of bath tissue would cause the quantity demanded of bath tissue to:

Accepted Answer

A) increase by 2.4 percent. 
B) decrease by 2.4 percent. 
C) increase by 24.2 percent. 
D) decrease by 24.2 percent. 
A) increase by 2.4 percent. 
B) decrease by 2.4 percent. 
C) increase by 24.2 percent. 
D) decrease by 24.2 percent.

Question 18

In the case of a linear demand curve,average revenue is equal to price,while (with the exception of Q = 1)marginal revenue is less than price.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements is correct for the case of a downward-sloping demand curve (beyond the first unit of output)?

Accepted Answer

A) P = AR = MR B) P = AR > MR C) P > AR > MR D) P = AR < MR A) P = AR = MR B) P = AR > MR C) P > AR > MR D) P = AR < MR

Question 20

Assuming the demand curve in question is downward sloping,the calculated price elasticity of demand will always be negative.

Accepted Answer

A) True 
 B)False

An increase in price will result in an increase in total revenue if demand is:

Explain why the price elasticity of demand varies along a demand curve,even if the demand curve is linear.

Assume an analyst has been hired to estimate the price elasticity of demand for Levi's brand blue jeans and for blue jeans in general.Ceteris paribus,we would expect the price elasticity of demand in absolute value to be:

Assume that when the price of good X is $12,quantity demanded is 32.When price is decreased to $9,quantity demanded increases to 45.Over this range,the arc elasticity of demand is 1.182.

When demand is perfectly inelastic with respect to price,the demand curve is horizontal.

The price elasticity of demand is measured as the percentage change in quantity demanded divided by the percentage change in price.

Assume that when the price of good X is $7,quantity demanded is 25.When price is increased to $9,quantity demanded falls to 20.Based on this information,over the range in question demand is elastic.

If the consumer has a great deal of time to adjust to an increase in the price of gasoline,which of the following is correct?

According to the text,the price elasticity of demand for oranges has been estimated to be -0.62.This implies that a doubling of the price of oranges would cause the quantity demanded of oranges to:

While the demand for beer is relatively price inelastic,the price elasticity of demand for a particular brand is relatively high,due in large part to availability of close substitutes.

Observations of consumer behavior suggest that when the price of gasoline rose above $3.50 per gallon,consumer demand for gas became considerably more price elastic.

Suppose the demand for meals at a medium-priced restaurant is elastic.If the management of the restaurant is considering raising prices,it can expect the total revenues the restaurant earns to:

When a consumer moves from a lower to a higher indifference curve,the marginal rate of substitution automatically increases.

For a particular product,a demand elasticity is a quantitative measure that shows:

Many unions attempt to raise the hourly wages received by their members by restricting the supply of workers firms can hire from.Assuming the demand for workers who belong to these unions is inelastic,this would cause:

Which of the following is not a basic assumption underlying the theory of consumer behavior?

According to the text,the price elasticity of demand for bath tissue has been estimated to be -2.42.This implies that a 10 percent decrease in the price of bath tissue would cause the quantity demanded of bath tissue to:

In the case of a linear demand curve,average revenue is equal to price,while (with the exception of Q = 1)marginal revenue is less than price.

Which of the following statements is correct for the case of a downward-sloping demand curve (beyond the first unit of output)?

Assuming the demand curve in question is downward sloping,the calculated price elasticity of demand will always be negative.

Managers and Economics

Demand, supply, and Equilibrium Prices

Techniques for Understanding Consumer Demand and Behavior

Production and Cost Analysis in the Short Run

Production and Cost Analysis in the Long Run

Market Structure: Perfect Competition

Market Structure: Monopoly and Monopolistic Competition

Market Structure: Oligopoly

Pricing Strategies for the Firm

Measuring Macroeconomic Activity

Spending by Individuals, firms, and Governments on Real Goods and Services

The Role of Money in the Macro Economy

The Aggregate Model of the Macro Economy

International and Balance of Payments Issues in the Macro Economy

Combining Micro and Macro Analysis for Managerial Decision Making

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Exam 3: Demand Elasticities

An increase in price will result in an increase in total revenue if demand is:

Explain why the price elasticity of demand varies along a demand curve,even if the demand curve is linear.

Assume an analyst has been hired to estimate the price elasticity of demand for Levi's brand blue jeans and for blue jeans in general.Ceteris paribus,we would expect the price elasticity of demand in absolute value to be:

Assume that when the price of good X is $12,quantity demanded is 32.When price is decreased to $9,quantity demanded increases to 45.Over this range,the arc elasticity of demand is 1.182.

When demand is perfectly inelastic with respect to price,the demand curve is horizontal.

The price elasticity of demand is measured as the percentage change in quantity demanded divided by the percentage change in price.

Assume that when the price of good X is $7,quantity demanded is 25.When price is increased to $9,quantity demanded falls to 20.Based on this information,over the range in question demand is elastic.

If the consumer has a great deal of time to adjust to an increase in the price of gasoline,which of the following is correct?

According to the text,the price elasticity of demand for oranges has been estimated to be -0.62.This implies that a doubling of the price of oranges would cause the quantity demanded of oranges to:

While the demand for beer is relatively price inelastic,the price elasticity of demand for a particular brand is relatively high,due in large part to availability of close substitutes.

Observations of consumer behavior suggest that when the price of gasoline rose above $3.50 per gallon,consumer demand for gas became considerably more price elastic.

Suppose the demand for meals at a medium-priced restaurant is elastic.If the management of the restaurant is considering raising prices,it can expect the total revenues the restaurant earns to:

When a consumer moves from a lower to a higher indifference curve,the marginal rate of substitution automatically increases.

For a particular product,a demand elasticity is a quantitative measure that shows:

Many unions attempt to raise the hourly wages received by their members by restricting the supply of workers firms can hire from.Assuming the demand for workers who belong to these unions is inelastic,this would cause:

Which of the following is not a basic assumption underlying the theory of consumer behavior?

According to the text,the price elasticity of demand for bath tissue has been estimated to be -2.42.This implies that a 10 percent decrease in the price of bath tissue would cause the quantity demanded of bath tissue to:

In the case of a linear demand curve,average revenue is equal to price,while (with the exception of Q = 1)marginal revenue is less than price.

Which of the following statements is correct for the case of a downward-sloping demand curve (beyond the first unit of output)?

Assuming the demand curve in question is downward sloping,the calculated price elasticity of demand will always be negative.

Managers and Economics

Demand, supply, and Equilibrium Prices

Techniques for Understanding Consumer Demand and Behavior

Production and Cost Analysis in the Short Run

Production and Cost Analysis in the Long Run

Market Structure: Perfect Competition

Market Structure: Monopoly and Monopolistic Competition

Market Structure: Oligopoly

Pricing Strategies for the Firm

Measuring Macroeconomic Activity

Spending by Individuals, firms, and Governments on Real Goods and Services

The Role of Money in the Macro Economy

The Aggregate Model of the Macro Economy

International and Balance of Payments Issues in the Macro Economy

Combining Micro and Macro Analysis for Managerial Decision Making

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